How the mighty have fallen. In the space of a week, great industrialists have been humbled, from flying high at the beginning of the week, to driving low (fuel consumption cars at the end), how quickly so much changes.
Three great names, millions of jobs, livelihoods and communities hang in the balance.
However, what is the price of maintaining the status quo - how many millions more will be affected by inaction, lack of innovation and the problems of climate change which are inevitably exacerbated by the emissions from personal transport.
Whilst the CEOs of these great companies fight to keep them alive in the 21st century, how relevant is it to have three companies competing with each other to produce last century's technology? If anyone thinks these companies are competing with each other, they are right - but to a limited extent - they are competing for the dwindling share of the marketplace that is happy with defunct technology. Domestic U.S. car production cannot compete anymore with it's lack of investment in innovation, tokenistic gestures to the green movement which has now become mainstream, and huge swathes of excess capacity.
Ford, Chrysler and GM can no longer compete, they have been outmoded and outmanoeuvred by Japanese automakers with their superior efficient methods and management of production. Their sleek fuel efficient vehicles and newcomers from the west-coast with radically disruptive vehicle technologies that are just starting to cross the chasm, and will eventually shape the way that we all drive.
Three near-dead auto makers will do no one no good in the long run.
Many people world wide, have an emotional connection with the brands that made the American Auto Industry great, I come from a family with a deep connection with one of them -- Ford -- my grandfather spend most of his life as Captain of Ford's launch 'The Interceptor' on the River Thames, London, whilst my father started his career as a toolmaker at Ford's Dagenham, U.K. plant and worked up through the company. I remember as a child going to school in pairs of socks with the 'Ford' logo neatly embroidered on the side, and occasionally being given the odd pen or trinket when some promotional items were floating about. I grew up around Ford, was fed by Ford pay-packets, was ferried around in Ford vehicles and grew up to attend a college part-funded by Ford shortly after they decided to cease car production in Dagenham.
The effect on the local community of a major car producer ceasing vehicle manufacture cannot be underestimated, yet whilst many were forced to find new jobs, were displaced and faced periods of difficulty, green shoots grew from the ashes. The production operations that remain at Dagenham are fit for the 21st century, powered largely by renewable energy, and the college that Ford built in association with a group of other local education organisations, was at one time the largest photovoltaic array in the UK, employing onsite generation of electricity, waste water recycling, and all the other innovations that are fast becoming ubiquitous in the 21st century.
The stories of these industrial giants, are not just ones of motoring prowess on the race track, slick styling or high performance; they are personal stories about families and communities that have grown up around these brands, groups of people whose existence depends on the continued survival of these brands - and who will ultimately be forced into processes of adaptation as these brands restructure themselves to meet the needs of the 21st century.
Many acknowledge the tough challenges that the industry has to face ahead - writers for this organ highlight the need for tough fuel economy standards to be maintained, whilst there is also a clear need to develop solutions beyond oil that will take us past hybrid technology into a zero-emission revolution.... but -- to ask three failing, cash-strapped companies to achieve this aim really is a big ask.
The answer for the American auto industry comes in amalgamation - pooling what intellectual property they collectively have to develop the next generation of vehicles. A stock-take of the production facilities, supply chains, human ingenuity and labour available, and a reallocation into project teams to develop different aspects of future automobility. Duplication of effort in developing similar mediocre solutions to giant problems will not achieve the radical change necessary -- but the combined might of the U.S. auto-industry could be a sufficiently big lever to radically change the motor industry - a radical change that is not only necessary: but imperative.
Rationalisation of production alongside a set of common platforms on which a variety of vehicle designs can be based. The European car industry have this down to fine art -- Volkswagen-Audi Group producing a range of vastly differentiated vehicle designs for Audi, Volkswagen, Skoda and Seat marques but sharing the commonality of development across the range. Using common mundane components, where differentiation achieves nothing, achieves economies of scale. It is this approach that has made VAG turn the fortunes of the ailing Czech auto manufacturer Skoda, from the butt of every European car joke into a brand respected for quality and reliability in little under a decade. America can replicate this success.
Excess capacity benefits no one -- lights burning in factories running at part load, inefficient machinery and tooling, the constant threat of redundancy hanging over the head of workers is no way to continue.
Whilst uncertainty allows people to limp on into the future and maintain the status quo, it benefits no one in the long run. Certainty can be painful if you're on the receiving end of bad news -- but it allows people to move on and make new plans.
These great names can live on as different marques; there is always room for product differentiation, different trim levels, dashboard styling, body cues and accessories, but the automotive platforms that underpin these marques should be high performance -- high environmental performance.
When tax dollars are in short supply, policy makers need to be selective about how they are spent, and buying plasters for cuts that have long since festered and turned gangrenous are not the answer.
The biggest impact in terms of achieving green innovation and creating a smart resilient business that is fit for the 21st century will come from keeping the best and encouraging it with smart investment, and a renewed mission; whilst ensuring that effective transitional procedures are put in place for the communities that will be faced with the closure of excess capacity.
A United Auto Industry for United Auto Workers. Call it American Motors, call it Amalgamated Motors, call it what you want, but the message is clear -- united these great names will stand, but together they will fall.
Follow Gavin D. J. Harper on Twitter: www.twitter.com/gavindjharper
This will take the edge of the minerals needed for electric cars.
It is indeed time for some tough love. The US Government must lead these companies out of this disastrous failure, and get them to build cars that are relevant in THIS century. Highly fuel-efficient, or preferably electric, practical cars are what we need. No more "Cadillac Escalades".
My car's 1981, 950cc petrol engine delivered 41.5 mpg, my modern [European] Skoda Octavia MkII delivers combined fuel economy of 42.8mpg in a much larger, more comfortable car.
By contrast, the current U.S. Corporate Average Fuel Economy standards, are for vehicles across a manufacturers range to consume 27.5mpg average. (Wikipedia will give you the detail)
We all have brand preferences, but tough times demand tough measures, and to a certain extent, a degree of tough love.
We need to put aside our badge-related differences, and focus on the future.
Throwing money at the system won't change it, a better analysis of where the system is failing is needed in order to create a sustainable remedy.
Some job losses are going to be inevitable; but far better one in six or one in five that losing the whole shebang. The people who suffer as a result of any structural change, should receive support, and transitional plans put in place to support communities that are affected by changing employment patterns. So much clean innovation is required in order to play catch-up; a nation that has lagged behind the rest of the world under the presidency of George W. Bush. Rather than looking at these large skilled workforces as a liability that must be managed, far better to treat them as a fantastic opportunity - a ready and motivated base of skilled people, who can help produce the items needed to enable the next, green industrial revolution.
I drove a Mk1 (1981) Fiesta as late as last year, it was a great car, and it's also a real testament to what we could do over 25 years ago - and how far we need to play catch up - check the original advert for the car here: http://www.fiesta-mk1.co.uk/press_releases_adverts/adverts_uk/generic_non_model_specific/generic_002.asp.
We all have strong associations with brands, it's what they're meant for - creating an emotional attachment and bond with consumers, that instills loyalty and trust in a group of associated products.
However, ultimately, I care far more for the lives and livelihoods of those people working to support the U.S. auto-industry, and those whose lives are touched by the failings of personal auto-mobility, such as the child in Bangladesh, whose home will be submerged by rising sea levels in a number of years, or the asthmatic in L.A. who struggles with the terrible air quality on a daily basis. These people ultimately matter far more, than an age-old artist's squiggle on a page that whilst meaningless in itself, has come to symbolise some form of shared meaning or heritage.
Nor do I think though, that it is wise, or prudent to support excess capacity or inefficiency. Everyone is being forced to tighten their belt, and it's unfair on a hard-working tax-payer to use their money to support a failing industry, and one that has been failing for many years, when the writing has been so clearly on the wall for so long.
The U.S. could do well to look at the case of BMC / Rover / British Leyland in the United Kingdom. Endless government bailouts didn't make a sustainable business model - the problems were deeper rooted, systemic and ingrained in the system.
These have enabled them to be ultra-competitive to the point where Toyota and it's derivative brands have surpassed Chrysler and latterly Ford in terms of U.S. car sales.
As for the American public; there will always be those who are resistant to change in any market place; but then how do you explain how so many Americans switch to Japanese brands over their domestic rivals? It all comes down to who can offer a superior product. Sure, there were people who 'bought British' and backed Rover to the very end, but faced with stiff competition from imported vehicles, Rover could not sustain its competitive advantage with many fragmented product lines and uncompetitive vehicles.
There comes a time when sentimentality for great companies that were needs to be put on the shelf... everyone remembers the 'good old days', but faced with a tough economic climate, and an even tougher challenge posed by stabilising atmospheric carbon levels to avoid runaway climate change.
Whilst merging the organisational cultures of these three behemoth companies presents an immense challenge, it is 'small beer' compared to the three challenges of:
I. Developing and commercialising next-gen vehicle technologies.
II. Saving the jobs, livelihoods and ultimately communities of as many of the workers of these three companies and their suppliers as possible.
III. Managing to compete with stiff competition from other manufacturers.
Part of this was Leyland's downfall, in that effectively they were a parent company for a wide variety of different marques and body designs, all the companies brought their own engines, gearboxes and products lines and by sustaining such a wide range of vehicles, when by contrast, Ford, say had the Fiesta, Escort, Cortina and Granada, whilst Leyland were simultaneously producing Jaguar, Land Rover, Triumph, Rover, Morris, Austin, Wolseley, Riley, Austin Healey, e.t.c. (each brand with a couple of product lines) the economies of scale weren’t there.
Where modern corporates such as Volkwagen-Audi group have succeeded, is to rationalise production of componenets such as floor pressings, suspension, engine, gearbox e.t.c. and craft individual brands on these common platforms.
If you look at the innovation required to achieve anywhere near sustainable levels of fuel consumption, whole new drivetrain technologies will need to be developed. It makes little sense for Ford, GM, and Chrysler each to come up with their own way to solve the problem (each with their own supply chain, small pool of specialist suppliers and proprietary technologies). No. If the collective might of the U.S. auto industry were pooled together, they might stand a hope. And it is a hope not a certainty - of regaining the competitive advantage that they have lost over several years, to the Japanese, with their superior technology, quality controls, just-in-time and lean production methods.
Merging the US car industry would lead to enormous job losses. Obama would doom his presidency before it even truly begins.
You are right though. Efficiency gains are a must. But does average American Joe understand? Given this, I think Obama has the right idea. He can't let the car industry collapse, in the same way the US couldn't let Fannie & Freddie go under. He has to save them by giving them a strictly conditioned bailout.
Even then, will they be able to compete with the Japanese auto-industry in 15 years? Probably not. But Obama will be sitting comfortably in his armchair, after completing two successful terms in office with the highest approval rating since FDR, thanks to his efforts in brokering a peace deal for the Middle East. And of course capturing Bin Laden, curing AIDS and solving the world's energy crisis. Well we can live in hope eh?
=====
My Reply:
Thanks for the food for thought:
You say it would never take shape - it did in Britain back in the Seventies and Eighties where just about every British car brand merged together to form 'BMC' the British Motor Company and later British Leyland.
I regularly post my articles to my 'Facebook' status, just to let my friends and associates know what I'm thinking about. I recieved a reply from an old school-friend Ryan Grimes, which I found thought-provoking, and so I thought I'd share it with you along with my reply:
=====
Ryan Wrote:
Whilst I agree with the economics and the principle of your argument, I cannot help but think it will never realistically take shape.
You're talking about three giants ingrained into American culture. Even suggesting they should be merged into one entity would surely be political suicide for a policymaker (aside from in California, I imagine).
My family like your own has strong ties to Ford. My Grandfather was an engineer on the design team of the MKI Fiesta, and served as a director thereafter. I daren't show him this article as I'm worried what the suggestion that Fords merge with GM & Chrysler could have on his health...
As an economist I see the reasoning behind the article. But as a realist? No. I'd imagine the general public in the USA would take to it as well as I would if you were to suggest that Jack Daniel's and Jim Beam merge. I would implode.
Then of course, there's the small matter of employment. Last month job losses in the USA hit the same highs 1974, and that was back when all their boys were being shipped out of Vietnam.
"Why don't we use some of the billions in stimulus and bailout funds to promote and set up some alternative energy projects in America."
Because the amount of time for that to work takes us to about 2020-2025. The problem at hand is to generate substantial amounts of work NOW.